[Shinrei]

I've got 3 commission free trades that expire in a couple of weeks. I haven't had time to do any research though, so I'm not sure what I'm going to do with them.

Doom and gloom hasn't kept me from the market, nor will it. If things collapsed to the point of losing everything, I think I (and all of us) will have bigger things to worry about.

[frookenhauer]

For professional reasons I am completely against the idea of global financial meltdown or utter collapse of the world market or any other radical doom and gloom scenario that anyone cares to put forward. The worst has already happened and it was just another case of everybody jumping on the money train going full pelt and it derailing over a sharp bend, if I can add my own little scenario to the pile, if you please.

Okay, so there is a $trillion or so deficit that needs to be funded somehow? Right, the enormous amounts of money that has been fed into the system ($750 Billion and £50 Billion and so on) will serve to devalue the $/£, another name for that is inflation. Inflation is our friend and in a few years that $trillion just wont be so bad as it is today.

Fact of the matter is, the watchdogs were happily asleep as the money rolled in and everybody was happy and skipping merrily down the markets. Securitisation is no longer regarded as 'safe as houses' and nothing is taken for granted, good. The watchdogs are awake and these highly paid and bloody intelligent suits are doing the best to make sure that they get to keep their jobs, which is a good thing as far as I'm concerned as no one works harder than a guy worried about losing his job if he 'fecks ap agin'. For the next decade we should have no real major upsets (hopefully ).

In the UK the Financial Services Authority is going to be phased out and replaced by...god knows what at the moment, heads will roll and placed on spikes along the Thames, we do it properly here in the UK. I'm unsure whether this was the right thing to do and will invariably cost boatloads, but somebody needs to pay I suppose.

As for me, I will continue to give sound ( ) financial advice to my clients in the hope (yes please) that they will buy my products and we all make money and live happily ever after. I am an unashamed money loving mofo and I say that forget the doom and gloom cos if it affects you it'll still only be a small percentage in terms of the financial impact and lets face it life has its up and downs. However, it has a greater psychological impact and those dirty press people are the biggest culprits to watch out for and will fan the flames and charge more for their advertising slots... I am forced to read the daily mail (burn baby burn) now and then so I know what my sworn enemy is saying. Carry on, its business as usual.

[Shinrei]

While you may be right that there won't be an outright collapse, saying the worst is over....how can you know that? There is no way of knowing that.

[Cold Iron]

Frookenhauer, on 13 November 2009 - 02:44 PM, said:

I have to disagree with you there cold iron. With regards to your analogy about councils opening up huge swathes of land for development, why would they? By doing so they would NOT get the market value on said land and lose money on the deal. The long term repercussions for doing so will mean that while there is plenty of land up for development where are the investors? Where is the money to make that land worth something? Hey presto industrial wasteland a la Detroit...and so on.

The shares market is the same, nobody, but nobody would want to lose money on the shares they own/control, its cutting your own throat unnecessarily. I dare you to find instances of such behaviour that have actually benefited the culprit.

There is a good article posted by Terez above, you should read it. People can make just as much money from a stock losing it's value as gaining it. Indeed when you are in control of a firm that stands to acquire another firm when it goes down the toilet, you stand to make a truck load of money from it's devaluing. This game is so far out of your control it's a bet pure and simple.

Quote

With regards to the little man making money in the stock market: The rules are simple. Buy shares in companies that you consider to be undervalued. Thats it. Did I say rules, plural? Yes, but if you stick to this one simple principle you will WIN. Earlier this year I was talking to my (then) richest client. He'd just done an investment for his wife with me and we were basking in the aftersales glow and chatting investments and we swapped ideas for investment opportunities. I told him it would be a very good idea to buy into Taylor Wimpy and he said it would be a good idea to buy into Barclays (amongst others). Both of our flagship choices had taken massive hits in the market, but we both felt they were both undervalued. My choice has yet to reach its full potential . But Barclay, Goddamn!, was at a price a little below 50p per share ( when we had our chat: Jan '09) and is now worth over 300...320p as of this moment and it reached this figure in just over 4 months. I should have gambled the farm and would now be typing on my own private Island, but hey ho I only dipped my toes and got a pretty significant chunk of change. Opportunities like this are, to be fair, going to be hard to find, but you are still going to be able to at least double your money with investments in a matter of months. For any man on the street, I'd say do some reading and see whats out there and learn. There are free investment programs that you can play the market with monopoly money and all sorts to get a feel for it. You could make millions, but you could also lose the farm.

My grandfather used to read the form guide a lot too, doesn't mean he always picked a winner.

Look generally speaking, you can stand to make money, I'm not disagreeing with that, my father has made substantial money over the years - but is it more than any other investment? He'll never know. Betting is addictive because it activates your dopamine pathways - the part of your brain that helps you recognise patterns and learn. But there are no predictable patterns, it's an illusion. Regardless of your success or failure you will always be left with the feeling that you could have done better, and so you will try harder. But the amount of effort you put in has very little correlation to how successful you are, it's chance.

People have said for years not to buy into oil, or silver, or other commodities that are owned by too few players because they manipulate the market to their interests. Well all I'm saying is that this can be just as true of shares - as we recently saw.

[Shinrei]

CI, it's hardly a bet. Gambling is set up so the odds are on the house winning. There is no "house" in stocks, and the ability to make informed decisions makes it much more than a game of chance. Meltdowns happen, but overall money can be made.

[frookenhauer]

Shinrei, if I believed otherwise I'd quit finance (again) and really will open up a pizza/kebab shop called the Phoenix Grill and Oven. But everywhere I look right now I see opportunities and a hell of a lot of growth potential and this shouts louder than the rubbish I read in the papers and listen to in the radio or watch on the box.

While I cannot know for certain that things will not get worse, I see very little proof to tell me it will. Whereas real signs for recovery are there: House prices have stabilised and are on the increase. Banks are lending again. The stock markets are seeing good business and the middle order investors are back, hurrah. Property developers are eyeing up new aquisitions and aquiring the finance to do so and this is a fact. High streets are busy again and we are now in the run up to christmas so retail is going to get a boost for the next few months and a few of the doom mongers have admitted that they thought the the recession would last longer.

Also history has shown us that every financial catastrophe has been followed by a period of growth, maybe not immediately, but it happens. How about this little statistic: For every 5 years that pass, 4 are growth years. And here's another little bit of good news (historically): When the recovery gets underway, it happens very fast. I have to admit that past performance (sales babble, but it applies) is not an indicator of what 'will' happen again, but it gives us trends and gives an insight into what could happen.

But, and thats a big BUT, he he, I could be wrong...possibly, maybe. All the knowledge I have gained in the last three year in finance, all the reading I've done thus far, the lessons from my lecturers, and the entrepeneur in me says this next year is going to be awesome. Is that enough for you shin?

CI - I'll have a reply for you tomorrow, missus is giving me the evils...BTW, I love short selling.

This post has been edited by Frookenhauer : 16 November 2009 - 12:28 AM

[Shinrei]

I guess the main concern I always have when I look at data on the economy (specifically the US, mostly) is the overwhelming creation of money, the so called liquidity, and then the fancy accounting that is meant to make us believe that the US dollar is not going to suffer from inflation. I can come up with some links if you'd like. Isn't this an underlying problem that in itself is a bubble of sorts, which could undo everything at some point? Loss of faith in the US economy could lead to serious issues...

Edited to add: I fully agree though that I think we're going to be in another rebound period of growth for a while. Looks good at the moment. Any recommendations I can research, or will I owe you a fee?

This post has been edited by Shinrei: 16 November 2009 - 05:43 AM

[frookenhauer]

CI - You met the dare , well done. Short selling is a great financial tool and people do in fact make money from it and like pretty much anything that exists out there is prone to be able to be used for nefarious purposes...The Article Terez refers to is really sensationalist and reads like something out of the Sun newspaper. Bear Stearns and Lehman brothers were overexposed to toxic debts and were ready to topple no matter what happened...

Read this article

It destroys the idea that naked short selling was responsible for the Lehman collapse. And comes from a site that is not sensationalist, and by that I mean a lying bunch of toe rags who cut and paste statements from completely different sources talking about completely separate issues to come up with new and interesting stories which immediately make people run for the hills.

I also had a bit of a chuckle when you brought up short selling because for someone who is so sure that we are heading for some sort of meltdown , then buying shorts or purchasing put options would seem to be the ideal choice of financial product for an esteemed gentleman such as yourself. And the same is true for all you nice people who are a ickle scared.

...Getting kicked out of the office, more to come later.

[frookenhauer]

Actually CI has a very good point with regards to Investing in the stock market being the same as betting, because you could lose the whole value of your initial investment. There is a risk after all, but this is nicely balanced by reward. And if we consider the house to be the brokerages, then the house does indeed always win. The reason day trading became so popular is because all the big finance houses touted it as the greatest thing since sliced bread and they get paid for every transaction that takes place through them. If anyone is in the market for working for a big finance house, in the interview always say that you are a firm believer that continual adjustments to a clients portfolio are essential to get the best result...given the right background and all that, you will be hired on the spot

But thats about as close as it gets. If ever you are at the point where you have a decent sum of money there are pretty much 2 ways to really get the most benefit from it. Spend it immediately so you get to utilise its full value or invest it. Putting it in the bank and getting the best rate is not a great idea as inflation invariably outstrips even the best saving rates. Even bonds really cant keep up with inflation. So exposing your capital to risk is really the only way to fly.

Shin, I'm actually counting on inflation to bail us out of this mess. I am unsure of what accounting you are referring to, but if you give us a heads up, I'll look at it. And I for one am really interested in Retail and Property at the moment and I think this is where the smart money will be heading...possibly

[Cold Iron]

I don't want to get into an argument about the merits of shorting, partly because I don't have time to do the research I'd need to do to keep up with someone trained in finance like yourself, and partly because you're not likely to change your tune, considering the sheer number of people you interact with day to day who would disagree with me - after all, I'm just some random guy on the net. I read the article you linked and I'd agree with it in so far as it says that naked shorting didn't cause the downfall of Lehman Brothers - but this is something of a strawman because the expose as I see it is really on how much volume can be generated for serious market manipulation rather than any sort of blame game. We all know there was plenty of rot, the shorting did nothing but capitalise off a known failure at the expense of everyone who owned shares in a reputable firm. This would include customers and friends of guys like you.

I say again, when big players can generate billions of sales at the drop of a hat, what place do you have getting involved with your hundred thousand? There are people out there with real control of the market, people who can generate not only sales, not only short sales, but media beat-ups. Can you create a media beat-up? Can you start a rumour that will result in generating a few extra million, or billion, in revenue this year? No? Then you are not one of these people. You do not have any real control, you are a pawn in a game that is being played behind closed doors. If you are happy with this fine, there are worse ways to make a living. But everything you've said, frook, speaks volumes of how uncertain you are. It's a good time to invest in shares, maybe, it's a good time to invest in property, maybe.

If more people knew this going in, I'd be happy, but people like you don't spend a proportionate amount of time telling people about the risk, it's always about the potential reward.

[Grand Goombah Graeld]

Caveat emptor

[frookenhauer]

I would hardly say that you are just someone random i met on the net CI, after all you did almost try to set me up with your sister after all . Someone like me? Gosh, that sounds pretty bad. Look, I am a very ethical person and one of the requirements of my job is to assess a persons attitude to risk. I go into some detail about this and the customer decides what they are comfortable with and it is only then that I make my recommendations and they MUST match the clients attitude to risk. I absolutely want my clients to make money, the more money I make them, the happer I am and the better I am paid, because I will make sure they tell their friends to recommend me (networking). Back in my co op days I told all my clients that they were better off investing with me on a monthly basis in my favourite co op funds to benefit from the drop in price and any further drops in price because they would get more for their money. These clients are now mine, they will follow me forever because 6 months on and their investments have doubled in value. Someone like me has made a difference to these people and some these people are not mega rich, some could only afford just £50 per month whereas others put in significantly more. Your dim view of people like me is probably just because of the fact you know nothing about us, but don't worry about it too much CI, this...mistrust is one of the things I have been trained to overcome .

I'm now pretty much independent and do everything from mortgages to investments and even home insurance and utilities. So my clients are a very mixed bag and the reason I say property is a great idea is because my friends and clients in property are active again, the same is true for the industry as a whole. I say retail is going to be great because all the news I am hearing at the moment is glowing and rosy and couple this with the run up to christmas and you've got yourself a winner.

With regards to shorting. Its seemple: If for any reason you believe that a company shares are going to drop in value you can make money from this by going short. Read this. Its a short wiki explaining what it is exactly. For a fee a smart investor can make some money, there is a risk involved and this is balanced by the reward he can get from a successful trade. There is nothing evil about it and it is a lovely financial tool.

[Cold Iron]

I'm sorry, when I said people like you I just meant people who have the same job as you, I didn't mean to imply that you were among the especially immoral.

Look I don't deny you have helped people, but it's not through any reliable skill or knowledge. Sure you work in the industry you follow the trends and most of the time you do well, but what of the people who encouraged people to invest in Lehman? I'm sure there are advisors out there with every bit as much skill and experience as you who were happily advising people to have a nice mix of financials in their portfolio, including Lehman and Bear Sterns and others who bombed.

I'm aware of what short selling is, and I agree there's nothing inherently wrong with it except it's potential for misuse and manipulation. There are very few people with the sheer trading volume at their disposal to carry off a coup large enough to be felt, and those that do tend to keep their heads down - but not always.

[Shinrei]

CI, these downs in the market are a fact of life. Investors have to understand this. This is why you need to be more risk adverse when you're close to retirement or retired. Someone like me who is young and doesn't ahve to live off the money, I can (and have) recovered from the big market downer and can hopefully watch my portfolio trot off into the sunset of gains.

The market is still the best vehicle for the average person to find a way to live well in the future, and even become rich.

Inflation, Frook, may help the big boys initially, but with wage growth flat, your regular joe is going to see their purchasing power dive and their savings dry up.

[Cold Iron]

Shinrei, on 17 November 2009 - 11:46 PM, said:

CI, these downs in the market are a fact of life. Investors have to understand this. This is why you need to be more risk adverse when you're close to retirement or retired. Someone like me who is young and doesn't ahve to live off the money, I can (and have) recovered from the big market downer and can hopefully watch my portfolio trot off into the sunset of gains.

The market is still the best vehicle for the average person to find a way to live well in the future, and even become rich.

I don't know. Here in Australia even the growth portfolios of the average super funds have only averaged about 6.5%pa returns over the last 10 years. How many people do you know who started off poor and ended up rich from stock trading? I'll go so far as to say it's likely the best way to invest your money without needing to quit your job - but it's certainly not going to make you rich as say trading in property or small businesses could.

Anyway the point is it's not a science. There's no reliable predictors and certainly no guarantees. The potential for getting ripped off is there and I don't like it.

[Powder]

HoosierDaddy, on 04 March 2009 - 10:01 PM, said:

From what I've read and seen, the economists say it isn't going away for awhile. However, they do hold out hope that we will begin to see a turnaround in 2010. Will that turnaround be abrupt and massive? Extremely unlikely, however, any positive signs are good.

Also: I wouldn't doom the stimulus packages just quite yet... give them a little more time, and hopefully we'll see the relaxing of credit.

I have 1 year left to go in Grad School, I am not totally sure what I am going to do when I get done. Ill ask those of you who know more about economics (not my field of study), worst case economy totally goes down, what happens to my personal school debts? Is it like fight club and it all gets reset at 0, or does something else crazy happen to my debts?

TY

Powder

[Jusentantaka]

Powder, on 18 November 2009 - 01:37 AM, said:

I have 1 year left to go in Grad School, I am not totally sure what I am going to do when I get done. Ill ask those of you who know more about economics (not my field of study), worst case economy totally goes down, what happens to my personal school debts? Is it like fight club and it all gets reset at 0, or does something else crazy happen to my debts?

TY

Powder

Kinda depends what you mean by totally, really. If there is some sort of complete financial apocalypse (which will probably be followed close behind by a real, physical apocalypse), there's not going to be anyone who can afford to pay people to tell you that you are delinquent with your bills, much less do anything about it (that'd be the zero case). If its just bad in the sense you cant get a job, you can probably defer payments if the bank you owe allows it (and I really can't imagine they won't) You'll owe some more money in the end, but a deferment is 'unlikely' to destroy your credit or anything (whereas being flat out delinquent in your bills is going to screw you in the longterm)

I've never had a cosigner for a loan before, but if you do, getting a deferment is apparently more difficult, (or the bank my husband got his loans from was just being bitches)


@CI: Hold on a sec there. You're saying the potential to get screwed exists in the market, and then seem to be suggesting property and small businesses? Really?

This post has been edited by Jusentantaka: 18 November 2009 - 02:44 AM

[Cold Iron]

The difference is transparency. You trade in property and small business, the screwing is out there in front of you where you have some control over it instead of in a wall street conference room.

[frookenhauer]

CI dont worry about it, I was yanking your chain a litle bit. People like me profit even if the market bombs, because we've already been paid. When the market is doing well we say: "Look how amazing it all is, now is the time to invest and make money." When the market is in the crapper we say: "You will get more for your money now than you did when things were better, now is the time to invest and make money." Both statements are true and both work. When the market is on the way down we say: "Buy monthly and you will benefit from any falls in the price of the funds units/share price." When the market is on the way up...And so on. How heartless am I? How do I live with myself? Well, its simple really. I know for a certainty that if my clients follow my advice they will make money. Its all about the timescale: If your vision is in the 1-2 year range then you will never ever be able to invest properly in the stock market. Start thinking in terms of 5 years plus and then you're talking. I used to carry around a simple graph when working with the co op. It was over a period of 10 years and showed how much money could be made from:

Instant access savings account: +50%
90 day savings account: +100%
Bonds: +150%
Corporate bonds: +250%
FTSE Tracker Fund +600%

It was a powerful tool and for people who were looking to invest (and even those that hadnt thought about it at the time), worked a treat. And it was the plain truth. This is an example of investing in the stock market indirectly via the use of a investnment fund. The benefit of doing so means that you get the expertise of a fund manager who only gets his bonuses if the fund makes money. Investment funds are ranked and get given ratings like AAA, AA, A, BBB and so on, these are directly liked to how well the fund is doing and its easy to see who is doing well and who is a pile of shite. Meaning just about anyone can make money from the stock market without any specialist knowledge. But it also means that you get reduced potential growth because those pesky fund managers cut into your profit margin through annual fees and monthly charges. Damn them for making you slightly less money than if you invested directly in the market and subjected yourself to all that added risk.

There is one small teensy little thing that could potentially happen that would mean you could lose money from investing in the stock market...Just a tiny, fleetingly insignificant thing really, but would mean you could lose tremendously. Whatever you do, do not invest huge sums of money when the markets are doing really well, if the market bombs the next day, you could see the value of your investment drop by far too much to be able to sleep at night. In fact the best time to invest is when the stock market is doing terribly. The beginning of 2009 was ideal, the only way was up. Funnily enough, very few people tend to buy into the stock maket at these times becuse they are too scared to do so

I started as a financial adviser pretty much at the same time as when we hit the credit crunch and all it entailed. I have no doubt that were I advising prior to that time I would have recommended that it would be a good idea to have a nice mix of financials in the portfolios such as Lehman brothers and so on. I'd have shown charts and the like and people would have bought into the idea because the numbers were just brilliant. There is nothing wrong with what those advisers did, its not their fault that the American housing market collapsed and started the chain of events that lead to this discussion(please note, I said started the chain of-). Those guys just saw an avenue for their clients to make money and thats all they were doing, trying to make their clients money. Nothing wrong with that at all, is there? Its what we FA's get paid to do.

With regards to short selling and its potential for misuse and manipulation, so what? You might as well hate the power of the written word for its potential for misuse and manipulation.

Shin, inflation will also help to reduce the financial burden of debt that people have to live with. The UK is a prime example: We have huge credit card debts, mortgages and take out loans even to go on holiday. Why save for a year when you can just take out a loan and buy that car tomorrow?

CI I have yet to coerce people to invest in Australian funds, what you've said just makes me never to want to do it at all, ever. 6.5%?!? Over 5 years? For a super fund? I have a new piece of advice: Stay away from Australia. No wonder you have such a dim view of the stock market I hope you are kidding.

CI your views with regards to risk are really skewed. Going into business is inherently more risky than investing in the stock market and therefore less likely to make money. First of all, when investing in the stock market you do not need to give in your job or anything like that, unless its a part time business, in which case it'll take longer to turn a profit. Also, going into business costs a tremendous amount in almost all cases. And thirdly to be any good at all in any business needs expertise/skill and knowledge of the industry you are going into. There are also a fourthly and a fifthly and so on. its far easier and less risky to invest in the stock market than in going into business for yourself...But with added risk comes greater rewards .

Powder, your debts will be worth less when you come out and will be less of a burden to you. Dont worry, unless I'm mistaken, the fianncial situation is not as dire as some would like to think and you should leave grad school when the market is on the up and up. Nice.

Cold Iron, on 18 November 2009 - 04:17 AM, said:

...the screwing is out there in front of you where you have some control over it instead of in a wall street conference room.

CI for an intelligent man as yourself, it should be clear that this is just plain unjustified paranoia. The people in wall street want to make money. For them to make money, people need to invest money in the stock market. For that to happen, it must be clear that if people invest money in the stock market, they will make money. So...it is in their best interests that they make sure that their clients make money, it is an imperative. In the face of this truth are you still so sure of your position?

[Urb]

Frookenhauer, how do you feel about the level of inside trading going on in the stock markets?

And also, I think what bothers me most about the stock market is how it seems generating cash flow is often more important than generating actual value in the form of technological advancement and good products. For some reason I have this impression of big market players deliberately stifling innovation in certain sectors because it would be bad for business. Am I being very prejudice?